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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7194
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I purchased a piece of equipment from a German co. gave them

Customer Question

Hello I purchased a piece of equipment from a German co. gave them a deposit of app $40k and now they are filling for insolvency.
JA: Has anything been filed or reported?
Customer: yes they sent me a document from a court in Dresden Germany that they are insolvent
JA: Since laws vary from place to place, what state is this in?
Customer: we are in Massachusetts, and the co. is located in Olbernhau Germany. The court they used is in Dresden Germany
JA: Anything else you want the lawyer to know before I connect you?
Customer: that about sums it up
Submitted: 1 month ago.
Category: Tax
Expert:  Stephen G. replied 1 month ago.

Hello, my name is***** goal is to give you a complete & accurate answer. I am working on your request now & I will respond as soon as possible.

Expert:  Stephen G. replied 1 month ago.

If you're asking what to do tax wise with the loss of the deposit, you would be entitled to a short-term capital loss.

Had the loss been the result of a default on an obligation in connection with a trade receivable, ie. for business conducted or services rendered) then the loss could be claimed as a business bad debt (ordinary deduction).

Since this was a cash deposit on equipment, it qualifies as a capital loss only.

Let me know if you have any follow-up questions.

Please remember to rate my response.

Thanks very much,

Steve G.